Risk-taking Decisions Research Articles

Conspecific presence and microhabitat features influence foraging decisions across ontogeny in a facultatively social mammal

Natural selection is expected to favor the evolution of threat-sensitive behaviors that permit individuals to adaptively detect and respond to danger. However, because time allocated to vigilance reduces the amount of time that is available for energy acquisition, foraging in the face of predation can impose an evolutionary trade-off. Optimal foraging theory therefore predicts that risk-taking decisions should vary in response to perceived levels of threat. Our goal here is to disentangle the relative contributions of conspecific presence, ecological factors, and individual traits on two measures of vigilance in free-living California ground squirrels (Otospermophilus beecheyi). This facultatively social and ecologically flexible rodent represents a major source of prey in California grasslands. Over a 5-year period, we collected 386 focal animal surveys on 156 free-living individuals residing at two colony sites. Individuals were most vigilant in conditions for which predation risk was highest, such as when foraging alone and on flat areas with low vegetative cover. In general, juvenile foragers were more gregarious but less vigilant than adult foragers. Although all animals—regardless of age or sex—generally decreased their intensity of vigilance as group size increased, only adults decreased their time allocated to vigilance in response to conspecific presence. Thus, grouping consistently buffered the costs of foraging for risk-averse adults, but the benefits of conspecific presence were less salient for juveniles. Taken together, our findings highlight the importance of context in shaping foraging decisions and offer insights into the suite of factors mediating decision-making in socially and ecologically variable environments. Animals face trade-offs when foraging in the face of predation, but the capacity for individuals to respond appropriately to subtle changes in context-dependent threats remains poorly understood. We studied antipredator vigilance by the California ground squirrel, a flexible species that may forage alone or in small groups of various sizes and in habitats that vary in their protective value from predators and the ease at which prey may detect predators. Although adults are more sensitive to changes in group size, all animals detected context-dependent danger to some extent. Our findings offer insights into the multiple factors that prey respond to when making foraging decisions, suggesting that animals possess the ability to integrate disparate sources of information about danger to optimize energy gain.

Should I stay, or should I go: Modeling optimal flight initiation distance in nesting birds.

Flight initiation distance (FID)–the distance at which an individual leaves in response to the approach of a perceived threat–provides a measurement of risk-taking behavior. If individuals optimize their FID, this distance should reflect the point at which the fitness resulting from leaving exceeds the fitness resulting from all other possible decisions. Previous theory of FID has often been aimed at explaining this behavior in foraging individuals. Yet flight initiation in response to approaching threats occurs in a range of contexts that might influence optimal behavior. In breeding individuals, risk-taking decisions that are made at a location of offspring care (e.g., a nest or den) can have significant effects on fitness. Here, we develop a theoretical model of distances at which a parent bird flushes from a nest in response to an approaching threat. We estimate parent fitness with regards to characteristics of the parent (reproductive values, detection distance, and cost of lost parental care cost), the nest (concealment and accessibility), and the approaching predator (detection capability and predation success), developing a dichotomous scenario between staying at the nest or leaving at varying distances. Using a generalized comparison of the benefits of leaving versus staying, we find that increasing costs of lost parental care, probability of predation of the parent due to fleeing, or current reproductive value lead to more instances of staying at the nest. In a complementary approach with specified parameters based on biologically-informed factors that likely influence a predator-prey encounter, we find that increasing the current reproductive value, concealment of the nest, or costs of lost parental care decrease optimal FID and can lead to the parent staying at the nest. Other factors, such as increasing residual reproductive value, predation success, and predator capability of detecting the nest, increase optimal FID with some instances of costs of fleeing being so great that staying becomes an optimal strategy. Our theory provides a framework to explain variation in FID among nesting species and individuals and could provide a foundation for future empirical investigations of risk-taking behavior.

The Coordination Role of Stress Test Disclosure in Bank Risk Taking

We examine whether stress tests distort banks' risk-taking decisions. We study a model in which a regulator may choose to rescue banks in the event of concurrent bank failures. Our analysis reveals a novel coordination role of stress tests. Disclosure of stress-test results informs banks of the failure likelihood of other banks, which can reduce welfare by facilitating banks' coordination in risk-taking. However, conducting stress tests also enables the regulator to more effectively intervene banks, coordinating them preemptively into taking lower risks. We find that, if the regulator has a strong incentive to bail out, stress tests improve welfare, whereas if the regulator's incentive to bail out is weak, stress tests impair welfare.

The Economics of Managerial Taxes and Corporate Risk-Taking

ABSTRACTWe examine the relation between managers' personal income tax rates and their corporate investment decisions. Using plausibly exogenous variation in federal and state tax rates, we find a positive relation between managers' personal tax rates and their corporate risk-taking. Moreover—and consistent with our theoretical predictions—we find that this relation is stronger among firms with investment opportunities that have a relatively high rate of return per unit of risk, and stronger among CEOs who have a relatively low marginal disutility of risk. Importantly, our results are unique to senior managers' tax rates––we do not find similar relations for middle-income tax rates. Collectively, our findings provide evidence that managers' personal income taxes influence their corporate risk-taking decisions.JEL Classifications: G30; G32; G38; H24; H32.Data Availability: Data are available from the sources cited in the text. Data on manager tax rates used in this paper are available at: http://acct.wharton.upenn.edu/∼dtayl/.

Age-related differences in striatal, medial temporal, and frontal involvement during value-based decision processing

Appropriate neural representation of value and application of decision strategies are necessary to make optimal investment choices in real life. Normative human aging alters neural selectivity and control processing in brain regions implicated in value-based decision processing including striatal, medial temporal, and frontal areas. However, the specific neural mechanisms of how these age-related functional brain changes modulate value processing in older adults remain unclear. Here, young and older adults performed a lottery-choice functional magnetic resonance imaging experiment in which probabilities of winning different magnitudes of points constituted expected values of stakes. Increasing probability of winning modulated striatal responses in young adults, but modulated medial temporal and ventromedial prefrontal areas instead in older adults. Older adults additionally engaged higher responses in dorso-medio-lateral prefrontal cortices to more unfavorable stakes. Such extrastriatal involvement mediated age-related increase in risk-taking decisions. Furthermore, lower resting-state functional connectivity between lateral prefrontal and striatal areas also predicted lottery-choice task risk-taking that was mediated by higher functional connectivity between prefrontal and medial temporal areas during the task, with this mediation relationship being stronger in older than younger adults. Overall, we report evidence of a systemic neural mechanistic change in processing of probability in mixed-lottery values with age that increases risk-taking of unfavorable stakes in older adults. Moreover, individual differences in age-related effects on baseline frontostriatal communication may be a central determinant of such subsequent age differences in value-based decision neural processing and resulting behaviors.

Peer effects and risk-taking among entrepreneurs: Lab-in-the-field evidence

We study how social interactions influence entrepreneurs’ risk-taking decisions. We conduct two risk-taking experiments with young Ugandan entrepreneurs. Between the two experiments, the entrepreneurs participate in a networking activity where they build relationships and discuss with each other. We collect data on peer network formation and on participants’ choices before and after the networking activity. We find that participants tend to make more (less) risky choices in the second experiment if the peers they discuss with make on average more (less) risky choices in the first experiment. This suggests that even short term social interactions may affect risk-taking decisions. We also find that participants who make (in)consistent choices in the experiments tend to develop relationships with individuals who also make (in)consistent choices, even when controlling for observable variables such as education and gender, suggesting that peer networks are formed according to unobservable characteristics linked to cognitive ability.

Cultural competence in working with the Arab Australian community: a conceptual review and the experience of the Arab Council Australia (ACA) gambling help counselling service

Although Culturally And Linguistically Diverse (CALD) communities participate less in gambling than the general population, those who gamble are more likely to show signs of disordered gambling (Moore and Ohtsuka International Gambling Studies, 1, 87–101, 2001; Raylu and Oei Clinical Psychology Review, 23, 1087–1114, 2004; Yamine and Thomas The impact of gaming on specific cultural groups, Victorian Casino and Gaming Authority, Melbourne, 2000). Research data on gambling problems and interventions in the Arab Australian community are extremely scarce. Therefore, this article will present an overview of the Arab Australian community and cultural issues regarding gambling within the Arab Australian community. Identifying these issues is important to work effectively with Arab Australians clients and those from other CALD backgrounds. The article also presents a conceptual review of peer-reviewed research articles on cultural competence in working with the Arab clients, the overview of Arab migration history to Australia and a summary of recent events that suggest a tension between Arab and non-Arab Australian communities. Observations and experiences that were encountered during the gambling counselling service operating in the Australian Arab community in New South Wales are also discussed. The research data to validate the effectiveness and positive impact of cultural competence are still in its early stages. However, a small number of community education resources have been available for working with the Arab community. From the data in annual reviews on the Arab Council Australia gambling counselling service, it was identified that cultural beliefs and expectations influence risk-taking decisions, identification of gambling issues, and preference of help seeking within the client’s social network. Further, culturally-specific sensitive issues related to political and global security events, which in turn influenced openness and willingness for the help-seeking of the Arab Australians, were identified. In conclusion, we propose that recognising diversity within the Arab Australian community is a prerequisite for increasing cultural competence and cultural sensitivity for helping professionals working with Arab Australians.

Global-local processing impacts academic risk taking.

Research has shown that academic risk taking-the selection of school tasks with varying difficulty levels-affords important implications for educational outcomes. In two experiments, we explored the role of cognitive processes-specifically, global versus local processing styles-in students' academic risk-taking tendencies. Participants first read a short passage, which provided the context for their subsequent academic risk-taking decisions. Following which, participants undertook the Navon's task and attended to either global letters or local letters only, i.e., were either globally or locally primed. The effects of priming on academic risk taking were then assessed using a perception-based measure (Experiment 1) and a task-based measure (Experiment 2). Experiment 1 provided preliminary evidence, which Experiment 2 confirmed, that globally focused individuals took more academic risk than did locally focused individuals after controlling for participants' need for cognition (how much they enjoy effortful cognitive activities). Additionally, the inclusion of and comparisons with a control group in Experiment 2 revealed that locally focused participants drove the observed effects. The theory of predictive and reactive control systems (PARCS) provides a cogent account of our findings. Future directions and practical applications in education are discussed.

The Effect of Local Tournament Incentives on Firmss Performance, Risk-Taking Decisions, and Financial Reporting Decisions

This study documents the existence of local employment preferences for corporate executives and examines how the compensation of executives’ local peers affects their own performance, risk-taking decisions, and financial reporting decisions. We find that external hires of new CEOs (CFOs) are five (eight) times more likely to be from local firms than non-local firms. We also find that local tournament incentives—as proxied by the pay gap between an executive and higher-paid executives in the area—are associated with stronger performance, greater risk taking, and more financial misreporting. We find consistent results using a difference-in-difference analysis that exploits plausibly exogenous variation in local tournament incentives caused by the sudden death of a local CEO. Our findings are consistent with executives taking actions to compete for a promotion to a nearby firm with higher pay. In addition, we find the effect of local tournament incentives is larger when local mobility is greater and executives’ local preferences are stronger.

Ambiguity and expectation-neglect in dilemmas of interpersonal trust

AbstractRecent research suggests that people discount or neglect expectations of reciprocity in trust dilemmas. We examine the underlying processes and boundary conditions of this effect, finding that expectations have stronger effects on trust when they are made accessible and when they are provided as objective probabilities (Study 1). Objective expectations have stronger effects when they are based on precise, rather than ambiguous, probabilities (Study 2). We also find that trust decisions differ from individual risk-taking decisions: people are more willing to trust, and expectations have stronger effects on trusting behavior (Study 2). These results show that the availability and ambiguity of expectations shape trust decisions, and that people differentially weight expectations in dilemmas of trust and individual risk-taking.

Risk-constrained scheduling of solar Stirling engine based industrial continuous heat treatment furnace

This paper presents a novel framework for designing and optimal scheduling of an air source heat pump based industrial continuous heat treatment furnace (ICHTF) which is driven by a solar Stirling engine and a wind turbine. The proposed flame-making process equipped with two inside and outside fans, an expansion valve, compressor, condenser and an evaporator to supply the heating demand with the high-temperature more than 900K over a 24-h time interval. Use of solar, wind and the proposed heating cycle in an industrial furnace with no need to fossil fuels reduce the greenhouse gas emissions and increase the economic saving in the consumption of petroleum products, significantly. Moreover, an information gap decision theory (IGDT) is implemented in order to find the optimal scheduling strategies taking into account the heating demand uncertainty. The IGDT technique assesses the robustness and opportunistic aspects of the optimal scheduling scenarios in the presence of heating load uncertainty to make the risk-averse or risk-taker decisions, respectively. The proposed ICHTF is simulated as a nonlinear programming (NLP) problem on a benchmark small-scale industrial sector to minimize total energy procurement cost considering the operational constraints of Stirling cycle and air source heat pump. Simulation results confirm that the risk-aversion or risk-taking decisions affect the output mechanical power of Stirling engine and total electrical power purchased from the upstream grid.

Escape ability and risk-taking behaviour in a Hungarian population of the collared flycatcher (Ficedula albicollis)

Risk-taking decisions in front of a predator are crucial for the fitness of the animals. Risk-taking behaviour can be hypothesised to depend on escape ability, which is difficult to study in the wild. In this field study, we investigated whether escape ability (i) is a consistent individual-specific characteristic and (ii) can explain between-individual variation in risk-taking behaviour in male collared flycatchers (Ficedula albicollis). We estimated escape ability by the time that was needed to capture individuals by hand in an outdoor aviary during both the courtship and the nestling feeding phases. We estimated risk-taking by human-induced flight initiation distance (FID) and parental nest-defence behaviour. We also measured variables that reflect individual quality and condition to assess how these affect escape ability. Time to capture was weakly repeatable in the within- and between-season contexts, but was considerably repeatable within a day. We found that time to capture decreased between courtship and nestling feeding phases, probably due to parallel changes in body condition (as shown by the systematic decline of individual body mass between phases correlating with within-individual changes in time to capture). Overall, time to capture was not significantly related to risk-taking behaviour, but we found a negative correlation between time to capture and FID in yearlings. In conclusion, escape ability in flycatchers seems to be a condition-dependent plastic trait, and it has the potential to affect immediate risk-taking decisions. We investigated the proximate determinants of escape ability in collared flycatcher males and whether this trait can be a potential driver of risk-taking behaviour, which is a rarely considered issue. We measured escape ability as time needed to capture birds in an outdoor aviary by hand. We found that escape ability was repeatable only in a short-term context, and differed between the courtship and chick-feeding periods, probably due to parallel changes in body condition. Furthermore, escape ability in yearlings (but not in adults) correlated with an estimate of risk-taking in the wild indicating that males with better ability to escape take higher risk. Our findings highlight that individual decisions about risk-taking might partially rely on how individuals assess their potential escape success.

Assessing anti-predator decisions of foraging eastern chipmunks under varying perceived risks: the effects of physical and social environments on vigilance

Animals foraging under risk have to trade-off resource acquisition and predator avoidance. Environmental factors can modulate the level of risk and should thus influence the expression of anti-predator behaviours such as vigilance. In this study, we investigated the effects of physical and social environments on eastern chipmunks’ (Tamias striatus) vigilance, by varying the perceived risk through playback experiments of alarm calls and neutral environmental sounds, and by integrating habitat and weather characteristics, as well as neighbour density. Chipmunks showed higher levels of vigilance when foraging in more open habitats, under high wind conditions, when they heard alarm calls and when surrounded by a high neighbour density. The effects of wind intensity and neighbour density on vigilance were also stronger during the broadcast of alarm calls rather than neutral sounds. Our results emphasize how both the physical and social environments can modify risk perception and therefore risk-taking decisions of foraging individuals.

Sharing Risk with the Government: How Taxes Affect Corporate Risk Taking

Using 113 staggered changes in corporate income tax rates across U.S. states, we provide evidence on how taxes affect corporate risk-taking decisions. Higher taxes reduce expected profits more for risky projects than for safe ones, as the government shares in a firm's upside but not in its downside. Consistent with this prediction, we find that risk-taking is sensitive to taxes, albeit asymmetrically: the average firm reduces risk in response to a tax increase (primarily by changing its operating cycle and reducing R&D risk) but does not respond to a tax cut. We trace the asymmetry back to constraints on risk-taking imposed by creditors. Finally, tax loss-offset rules moderate firms’ sensitivity to taxes by allowing firms to partly share downside risk with the government. This article is protected by copyright. All rights reserved

Sharing Risk with the Government: On the Causal Effects of Taxes on Corporate Risk-Taking

Using 113 staggered changes in corporate income tax rates across U.S. states, we provide evidence on how taxes affect corporate risk-taking decisions. Higher taxes reduce expected profits more for risky projects than for safe ones, as the government shares in a firm’s upside but not in its downside. Consistent with this prediction, we find that risk taking is sensitive to taxes, albeit asymmetrically: the average firm reduces risk in response to a tax increase (primarily by changing its operating cycle and reducing R&D risk) but does not respond to a tax cut. We trace the asymmetry back to constraints on risk taking imposed by creditors. Finally, tax loss-offset rules moderate firms’ sensitivity to taxes by allowing firms to partly share downside risk with the government.

Information Gap Decision Theory-Based Risk-Constrained Bidding Strategy of Price-Taker GenCo in Joint Energy and Reserve Markets

This paper presents an optimal bidding strategy for price-taker generation companies (GenCos), which participate in a day-ahead joint energy and reserve market. Moreover, this problem is formulated as a Mixed-Integer Quadratic Constrained Program (MIQCP) to maximize the profit. Also, the price uncertainties of energy and reserve markets prices have direct impacts on the expected profit and bidding curves. This optimization problem is modeled with utilization of information gap decision theory (IGDT) for optimizing robustness to failure—or opportunity to windfall—under uncertainty conditions. IGDT assesses the robustness/opportunity of bidding strategy in the face of price uncertainties to determine whether a decision is risk-averse or risk-taking. Correlations among the prices of energy and reserve markets are properly modeled based on the concept of weighted average squared error using a variance–covariance matrix. It is shown that the risk-averse decisions, as well as risk-taking decisions, will affect both expected profit and bidding curves. The proposed method is verified in simulation studies on a GenCo comprising 5-unit thermal that participates in a day-ahead joint energy and reserve markets. Also, the proposed model is applied to a 54-unit thermal GenCo of IEEE-118 bus to validate the computational effectiveness of the proposed model in large system.

Gender, Management Styles, and Forms of Capital

Extant research notes a tendency to propound the idea that female managers are secondary to men. Gender differences constitute an ethical issue and the discursive constructions of gender management are central to research in business ethics. Drawing on evidence gathered from a time–space intersection that has been widely neglected by research in this area, we address whether female business leaders develop gender-stereotypic management styles as well as their propensity to adopt masculine management patterns such as making risky decisions and implementing formal management systems (e.g. accounting reports). Our findings suggest that gender-stereotypic management styles are chosen strategically and target-driven, which implies a selective use of masculine and feminine management styles. Furthermore, as part of the masculine approach, female business owners adopt risk-taking decisions and implement formal management systems. Our results provide support for the argument that gender is context dependent and, hence, the findings of this study may be useful for contemporary jurisdictions featuring male-dominated societies and a strong intervention by the State in the economy.

Developing proactive salespeople – a study and recommendations for sales management

Purpose The purpose of this paper is twofold. First, it provides the results of a study of key characteristics of proactive salespeople and the impact of salesperson proactive behavior on selling performance. Second, it provides recommendations for sales management to implement organizational strategies designed to develop, train and coach salespeople to be more proactive. Design/methodology/approach In all, 278 business-to-business salespeople were surveyed to identify key traits and outcomes of proactive salespeople. The average subject was 28 years of age with 5 years of selling experience. Scales from the management, organizational behavior and sales performance literature were used to identify the degree that subjects engaged in proactive behavior in their selling role, a self-assessment of their sales performance and individual traits thought to predict higher levels of proactive behavior. Findings The findings revealed that proactive salespeople exhibited high levels of selling behavior performance – an important contributor to measurable selling results. In addition, proactive salespeople were intrinsically motivated, confident in the tasks of selling and willing to take calculated risks. Practical implications Practical implications suggest that sales managers can play a key role in fostering proactive behavior among salespeople through development, training and coaching. First, sales managers can play a role in the development of salesperson intrinsic motivation by stressing the importance of asking good questions to understand their customer’s problems to the extent that they can be proactive and recommend solutions for change. Second, training programs to make salespeople more confident should center on fully understanding product/service functionality and applications to typical customer problems. Finally, coaching tools such as win–loss reviews, post-call analysis/feedback and role-playing are useful mechanisms to reinforce the right type of risk-taking selling behavior decisions. Originality/value The value of this research is to shed light on the importance of salesperson proactive behavior as a means to drive selling organizational performance and fostering long-term customer relationships. Understanding the drivers of proactivity among salespeople is the first step for sales management to be able to operationalize organizational strategies to develop, train and coach salespeople to be more proactive in their selling approach.

The Role of Psychological and Physiological Factors in Decision Making under Risk and in a Dilemma.

Different methods to elicit risk attitudes of individuals often provide differing results despite a common theory. Reasons for such inconsistencies may be the different influence of underlying factors in risk-taking decisions. In order to evaluate this conjecture, a better understanding of underlying factors across methods and decision contexts is desirable. In this paper we study the difference in result of two different risk elicitation methods by linking estimates of risk attitudes to gender, age, and personality traits, which have been shown to be related. We also investigate the role of these factors during decision-making in a dilemma situation. For these two decision contexts we also investigate the decision-maker's physiological state during the decision, measured by heart rate variability (HRV), which we use as an indicator of emotional involvement. We found that the two elicitation methods provide different individual risk attitude measures which is partly reflected in a different gender effect between the methods. Personality traits explain only relatively little in terms of driving risk attitudes and the difference between methods. We also found that risk taking and the physiological state are related for one of the methods, suggesting that more emotionally involved individuals are more risk averse in the experiment. Finally, we found evidence that personality traits are connected to whether individuals made a decision in the dilemma situation, but risk attitudes and the physiological state were not indicative for the ability to decide in this decision context.

Effects of national culture on bank risk-taking behavior

Theory suggests that national culture influences bank risk-taking behavior directly by conditioning the decision-making of human participants. This study uses an international sample of banks from 75 countries and examines the direct effects of national culture on bank risk-taking behavior. We measure national culture with four dimensions – uncertainty avoidance, individualism vs. collectivism, masculinity vs. femininity and power distance – from Hofstede's framework of national culture. We find strong evidence that bank risk-taking is significantly higher in countries which have high individualism, low uncertainty avoidance, and low power distance cultural values. We confirm main results using alternate cultural dimensions from House et al. (2004. Culture, Leadership, and Organizations. Sage)’s framework of national culture, using alternative bank risk-taking proxies, and using instrumental variables analysis for endogeneity issues. This paper adds to our understanding by finding that cultural values lead to bank risk-taking decisions that may deviate in systematic and geographically predictable ways.